Export markets USA: German Machine Manufacturers Bet Strongly on the US

| Author: Stéphane Itasse

USA has arrived again – at least from the perspective of German machine manufacturers: in 2015 it became one of Germany’s biggest export destinations and this situation will persist in 2016 too, or so expects the VDMA. According to a survey conducted by the Association, the overwhelming majority of German machine manufacturers operating in the USA are expecting increased turnovers.

Products of German machine manufacturers are in great demand once again because deindustrialisation appears to have stopped in the USA.
Products of German machine manufacturers are in great demand once again because deindustrialisation appears to have stopped in the USA.
(Photo: Siemens)

According to the survey, three of four German machine manufacturing companies are confident that they will be able to do better business on the other side of the Atlantic in 2016. This confidence is reflected in the investment plans too. A good 60 % of the companies participating in the survey plan to invest in the US in the next three years. The first place is occupied by expansion of sales at 86 % and services at 77 %, but 50 % of the surveyed German machine manufacturers would also like to engage in production or assembly / installation.

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Nevertheless, the US market does not offer any grounds for euphoria. Due to the relatively weak economic environment and the drastic reverses in investments in the Fracking sector, VDMA is reckoning a slight increase in exports to the US, especially looking back at 2015, when a growth of 11.2 % to 16.8 billion Euro made VDMA President Dr. Reinhold Festge euphoric: “It was an excellent result and in the end, a historic peak.”

German machine manufacturing in the US benefits from long-term connections

The reason for this is also the fact that in the previous year the companies suffered a tail wind due to the sinking Euro rate, which is not the case in the current period. “But the commitment of the German machine building industry in the US is not marked by short-term measures, it is characterized by all means by decades old relationships”, said Festge on the occasion of the publication of the survey, in which approx. 200 machine manufacturing companies participated. This closeness would definitely be honoured in the market.

This also appears to be the reason why the VW exhaust gas affair hardly had any effect on machine manufacturing. Only 17 % of the surveyed companies conceded according to VDMA, that the reputation of the German industry has worsened since the beginning of 2015. Among German companies with their own branch offices in the US, the figure is only 10 %. “We are relieved that it did not assume the proportions of a conflagration”, commented the Association President.

Industry in the US is getting back on its feet again slowly

German machine exports to the US traditionally cover a very wide range. Among other things, there is high demand for drive technology, conveyor technology, building and building materials machines, agricultural technology, machine tools or foodstuff and packaging machines. It is expected that customers from the US automobile industry and the local machine building sector in particular will increase their orders from German companies this year. About a third of the surveyed companies considers investment congestion to be an important factor in increasing demand from the US. The surveyed companies expect a reindustrialization of the US economy. This is not reflected in the statistics yet: The share or the processing industry in the US gross domestic product has swung meanwhile by approx. 12 %. “But we can say: The deindustrialization of America has ended”, explained VDMA Chief Economist Dr. Ralph Wiechers. “And at many places, factories in the US have gone through modernisation, which will benefit the German machine building industry.” Festge does not want to recognise the trend of reindustrialisation, it is at the most a regional development.

The position of German companies in the US is certainly not undisputed. More than half of the surveyed companies expect increasing competition from China. This is already evident from the current import structure of the US: China climbed to the position of the most important foreign machine delivering country in 2013, Germany occupies the 4th position since 2015, just behind Mexico at Position 3 and Japan at Position 2. Even the American machine manufacturing companies are picking up in the local competition, according to the surveyed companies. This includes not only original US companies but also manufacturing sites of foreign companies in the US.

In this background, the VDMA is supporting the planned Free Trade Agreement (TTIP) with the USA very strongly. Removal of all customs duties can bring cost savings of one billion Euro, according to the estimate of the Association, dismantling of non-tariff trade obstacles and a mutual recognition of testing processes and certificates would bring further savings in trade. Two thirds of the surveyed companies answered the question whether a successful conclusion of the TTIP negotiations is crucial for their company in the affirmative.

(ID:44071851)

About the author

 Stéphane Itasse

Stéphane Itasse

MM MaschinenMarkt